Legislature(1999 - 2000)

02/16/2000 01:40 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
HOUSE BILL NO. 116                                                                                                              
                                                                                                                                
An Act relating to the Board of Agriculture and                                                                                 
Conservation, to the agricultural revolving loan fund,                                                                          
to the disposal of state agricultural land, and to the                                                                          
Alaska Natural Resource Conservation and Development                                                                            
Board; and providing for an effective date.                                                                                     
                                                                                                                                
REPRESENTATVE JEANNETTE JAMES noted that HB 116 was the                                                                         
culmination of much intensive work by representatives from                                                                      
the Legislature, the Administration, conservation boards and                                                                    
the agriculture industry.                                                                                                       
                                                                                                                                
She stated that HB 116 would propose a new board, the Board                                                                     
of Agriculture and Conservation, comprised of the                                                                               
Commissioner of Department of Natural Resources plus seven                                                                      
people involved in grass-roots commercial production                                                                            
agriculture.  The legislation would extend the life of the                                                                      
Agriculture Revolving Loan Fund (ARLF) by instituting grass                                                                     
roots fiscally conservation board that would have more                                                                          
control over the Alaska Revolving Loan Fund.  HB 116 would                                                                      
make the ARLF interest rate competitive with other loaning                                                                      
institutions which are currently drawing farmers away and                                                                       
shortening the life and income of the ARLF.  Representative                                                                     
James noted that HB 116 would allow flexibility for the new                                                                     
board to restructure loans in the event of a disaster, and                                                                      
it would strengthen the emergency loan program.                                                                                 
                                                                                                                                
Representative James added that the bill would assure that                                                                      
the board would be consulted prior to any disposal of                                                                           
agricultural land.  The new board would take over statutory                                                                     
duties of the existing Division of Agriculture and would                                                                        
hire an executive director.  She believed that would mean a                                                                     
predictable continuity for that position.  She urged the                                                                        
Committee's support of the legislation.                                                                                         
                                                                                                                                
Representative James acknowledged that the interest rate                                                                        
issue had been addressed in a separate piece of legislation                                                                     
that has already passed out of the House Finance Committee.                                                                     
Representative James emphasized that it is imperative HB 166                                                                    
accompany that legislation.  She pointed out that all the                                                                       
land sale decisions would be left in the bill.                                                                                  
                                                                                                                                
Representative James spoke to the fiscal note.  She pointed                                                                     
out that the $9 thousand dollars travel component had been                                                                      
determined by Department of Natural Resources.  The                                                                             
Department noted that in creating a new board, there                                                                            
initially would need to be more meetings to establish                                                                           
regulations.  She explained the funding would come from the                                                                     
ARLF.  She suggested that the board and the Creamery                                                                            
Corporation would offset some of those costs. The creamery                                                                      
funds are not listed on the note.                                                                                               
                                                                                                                                
Representative James stated that additionally, there exists                                                                     
an assumption that the change would result in a reduction in                                                                    
revenue from the interest rate.  She assumed that interest                                                                      
rate reductions would result in new loans.  Currently, the                                                                      
interest rates are higher than most other loan companies,                                                                       
which keeps them from being competitive.  She disagreed with                                                                    
the idea of a change to revenues.                                                                                               
                                                                                                                                
Co-Chair Therriault commented on the loss of revenue.  He                                                                       
noted that in the proposed committee substitute, the changes                                                                    
would conform the loan provisions included in HB 116 with                                                                       
the Committee's work done on Representative Harris' bill.                                                                       
                                                                                                                                
Co-Chair Mulder MOVED to adopt the work draft committee                                                                         
substitute, 1-LS0407\T, Cook, 2/15/00, as the version of the                                                                    
bill before the Committee.  There being NO OBJECTION, it was                                                                    
adopted.                                                                                                                        
                                                                                                                                
Co-Chair Therriault referenced the fiscal note.  He pointed                                                                     
out that the sponsor statement indicates that the new board                                                                     
would take over the duties and responsibilities of the                                                                          
Division.  He asked if it was the intent that the board                                                                         
takes over "all the responsibilities" of that agency.  He                                                                       
advised that some of those obligations were specified in                                                                        
statute.                                                                                                                        
                                                                                                                                
Representative James replied that through the legislation,                                                                      
the board would be making the decisions currently made by                                                                       
the Director of Agriculture.  She commented that if the                                                                         
Department wanted to change the direction of the Division,                                                                      
that would be their prerogative.  The authority given by the                                                                    
Division of Agriculture, which would be managed by a board                                                                      
of directors, would be the hiring of a director as opposed                                                                      
to the advising of a director.                                                                                                  
                                                                                                                                
Representative James commented that the board has a job to                                                                      
do and a lot of decision making associated with performing                                                                      
that work.  The intent of the legislation is to keep the                                                                        
direction going in a forward movement.  The purpose of the                                                                      
legislation is to place the regulation and policy power in                                                                      
the hands of the Board of Agriculture.  They would implement                                                                    
policies through the statutory authority given to them.                                                                         
                                                                                                                                
Co-Chair Therriault spoke to the duties assigned to the                                                                         
Division of Agriculture.  He noted the "vested" duties of                                                                       
each position.  The Commissioner delegates certain duties to                                                                    
the Division Director.  He summarized how he envisioned the                                                                     
legislation had been drafted.  He noted that there are few                                                                      
items that the Division is responsible for which have a                                                                         
specific statutory directive.  He asked what would happen to                                                                    
those situations delegated by statute to the Commissioner.                                                                      
                                                                                                                                
Representative James understood that the Division of                                                                            
Agriculture is under Department of Natural Resources.  She                                                                      
stated that the issues would instead be delegated to the                                                                        
Division of Agriculture.  That Division would be managed by                                                                     
the Board of Agriculture with hired staff.  She did not                                                                         
foresee anything changing.  She commented that she did not                                                                      
know if there would be a need for a statutory change.                                                                           
Representative Green did not foresee a Board of Agriculture                                                                     
with any authority.                                                                                                             
                                                                                                                                
Representative Austerman voiced his appreciation on all the                                                                     
work that Representative James had accomplished for                                                                             
agriculture business development.                                                                                               
                                                                                                                                
Representative J. Davies echoed his appreciation on that                                                                        
issue.  He voiced concern with the option of the board                                                                          
hiring the director.  He suggested that idea be revamped, as                                                                    
the current process works well.  He stressed that the effect                                                                    
of the current practice has achieved the intent of the                                                                          
proposed legislation.  He questioned if expanding the                                                                           
continuity of the director had been considered, because that                                                                    
action would make it more difficult for a governor to remove                                                                    
that director.                                                                                                                  
                                                                                                                                
Representative James responded that the issue had been                                                                          
considered regarding whether or not the removal of a board                                                                      
member could occur at the "pleasure of the Governor or for                                                                      
cause". She believed that the legislation would allow the                                                                       
removal for cause.  In the original version of the bill, in                                                                     
order to accomplish that, the board would need to be                                                                            
approved by the Legislature.  She noted that at the request                                                                     
of the Department, that clause was removed.                                                                                     
                                                                                                                                
Representative James maintained that there is an issue                                                                          
regarding the changing of directors and how that affects the                                                                    
Board of Agriculture. She maintained that a change in                                                                           
policy, which comes with a change in director, is difficult.                                                                    
She stressed the need to provide a continuity of policy and                                                                     
did not believe that the comparison with the Board of                                                                           
Forestry was relevant.                                                                                                          
                                                                                                                                
Representative Grussendorf questioned if changing the                                                                           
statutes would cause constitutional problems in the                                                                             
Governor's power to appoint.  Representative James responded                                                                    
that there are some similarities to the Alaska Seafood                                                                          
Marketing Institute Board (ASMI). She emphasized that the                                                                       
concept is how to guarantee continuity of policy.                                                                               
                                                                                                                                
ROB WELLS, BOARD OF AGRICULUTRE AND CONSERVATION, MATSU,                                                                        
(TESTIFIED VIA TELECONFERENCE) expressed concern with the                                                                       
legislation.  He acknowledged the intent to bring continuity                                                                    
and policy between Administrations and to allow farmers to                                                                      
control their own entity by managing the revolving loan                                                                         
fund.  He referred to an audit by the Legislative Budget and                                                                    
Audit Committee (LBA) from two years ago.  Mr. Wells noted                                                                      
that the audit found that the Board is conservative                                                                             
realizing that most of the Division functions are funded                                                                        
from the ARLF.  He noted, for the record, that there is                                                                         
concern with the delegation of authority.  He advised that                                                                      
the sponsor statement notes that duties of the Division will                                                                    
be transferred to the Board.                                                                                                    
                                                                                                                                
Mr. Wells added that the three-year appointments could be                                                                       
problematic.  He suggested that the current Governor would                                                                      
appoint all members.  There could be a change of 6 members                                                                      
in one year, which would most likely result in that Board                                                                       
choosing a new director.  Such action would remove the                                                                          
continuity that the sponsor is seeking.                                                                                         
                                                                                                                                
Mr. Wells voiced concern with members who have loans, being                                                                     
able to sit on the Board.  He suggested such action could                                                                       
warrant members being questioned through the Executive                                                                          
Ethics Act.  Mr. Wells agreed with Representative James that                                                                    
the interest income raising and falling would affect                                                                            
revenue.  He voiced concern with the constitutional powers                                                                      
of the Governor.  A Board should control the State assets in                                                                    
the revolving loan fund, an action still requiring an annual                                                                    
budget.  It would no longer need to be an inline provision.                                                                     
Mr. Wells questioned, under the new structure, if an appeal                                                                     
could be made.  He reiterated his concern regarding how this                                                                    
would function in today's world.                                                                                                
                                                                                                                                
JAMES BALDWIN, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF                                                                        
LAW, noted that he had reviewed the bill for the                                                                                
Administration.  He spoke to the concept of the legislation                                                                     
placing an independent board over a line agency.  He                                                                            
commented that there is a constitutional argument to be                                                                         
made, indicating such action should not be allowed to happen                                                                    
under the current framework.  In A.S., Article #3, it                                                                           
clarifies that premise.  There is one instance, that you                                                                        
would be allowed to have a multi member board be at the head                                                                    
of a principle department, but in that instance, the                                                                            
Governor would be allowed to approve the Executive Director                                                                     
hired by that board.  It would not be legal to take a small                                                                     
discrete section of a department and do that.  Divisions are                                                                    
not mentioned in most statutes, as they are an unassigned                                                                       
function.  Mr. Baldwin noted that an instance of making a                                                                       
division director as an appointee of a division board is an                                                                     
unusual concept, however, he noted that there have been                                                                         
compromise situations.                                                                                                          
                                                                                                                                
Mr. Baldwin mentioned that if such provisions were in law,                                                                      
it would be very difficult to remove that board member.  He                                                                     
mentioned that there could be problems with imbezzilment                                                                        
and/or responsibility to State agencies.  Mr. Baldwin                                                                           
reiterated that it is difficult to enforce a for-clause                                                                         
provision.                                                                                                                      
                                                                                                                                
Mr. Baldwin continued, a "for-clause provision" recognizes                                                                      
that certain individuals have property rights in office.                                                                        
That type of board member does not have a salary but does                                                                       
have a "term of office".  That term is staggered which could                                                                    
present a problem.  He stressed that continuity is important                                                                    
in government, but the problem arises when trying to                                                                            
determine how to fix responsibility for governments actions.                                                                    
The manner, in which the Alaska Constitution does it, is by                                                                     
making the Governor responsible.  The concern is that the                                                                       
State of Alaska has "government by board" to run things                                                                         
locally, but with statehood, the State opted that the                                                                           
Governor be the responsible party for how government                                                                            
operates.  At present time, one or two people are                                                                               
responsible. Mr. Baldwin stated that the proposed concept                                                                       
would be erosion back to the old unworkable ways.  He urged                                                                     
that the Committee not adopt the legislation.                                                                                   
                                                                                                                                
Mr. Baldwin spoke to the "conflict of interest" clause,                                                                         
which is not that much different from what currently exists.                                                                    
He referenced Page 2, Line 20, noting concern with the                                                                          
wording "affects that lease, permit or loan".  He commented                                                                     
that language was "loose" and would cause problems.                                                                             
                                                                                                                                
Representative James responded to where the board would sit                                                                     
in the "scheme" of things.  She pointed out that those                                                                          
involved in the agriculture industry fear that the ARLF is                                                                      
not spending funds appropriately.  "A government does not                                                                       
shrink itself by nature".                                                                                                       
                                                                                                                                
Representative James advised that the Commissioner would                                                                        
supervise the activity.  She pointed out that all decision                                                                      
making power of the Director would go into the Board of                                                                         
Agriculture.  That would result in taking the authority from                                                                    
one person and putting it into a board.   She noted that a                                                                      
joint group of people would be implementing the intent of                                                                       
the Commissioner.                                                                                                               
                                                                                                                                
Representative James indicated that the legislation would                                                                       
enhance the agricultural activities of the State.  She noted                                                                    
that regulations and policies would be drafted according to                                                                     
the statutes.  Policies are looser and need to be treated                                                                       
equally over time.  She acknowledged that it would be an                                                                        
experiment.                                                                                                                     
                                                                                                                                
(TAPE CHANGE, HFC 00 - 35, SIDE 2).                                                                                             
                                                                                                                                
Representative James emphasized that the allocation of                                                                          
duties would be fairly distributed.                                                                                             
                                                                                                                                
Co-Chair Therriault noted that HB 116 would be HELD in                                                                          
Committee for further consideration.                                                                                            

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